CIPS Australasia Best in Procurement Webinar Series

CIPS is dedicated to promoting excellence in procurement and supply through sharing knowledge and examples of best practice. To this end, please see below a series of webinars titled ‘Best in Procurement’, which serves as a platform to share the very best examples of procurement excellence within the Australasia & Asia Pacific region, as adjudicated by industry leaders at the 2016, 2017 & 2018 CIPS Australasia Supply Management Awards.

During these webinars, winners guide through their journey to procurement excellence and provide insights on their successful project from conception, implementation, management and outcomes observed.

Three years ago, Air New Zealand formed the Business Performance Group (BPG) to centralise and optimise functions including procurement, logistics, infrastructure and aircraft programmes.

Driving a step change in people capability was central to the plan. It adopted a clear and systematic approach, from auditing existing capability through to certification.

The airline company created value stream working groups, such as digital, market engagement, commercial acumen and innovation. These enabled procurement leaders to cascade knowledge to the wider function.

The initiative has not only resulted in internal promotions and increased certifications but improved the reputation of procurement as a value-adding function, including the creation of a ‘Go Beyond Together’ Air New Zealand supplier relationship programme designed to make the airline customer of choice for suppliers.

The judges described the project as a 'good example of lifting procurement capability to impact the wider business. A committed investment in procurement professionals with evidenced people and organisational outcomes'.

Procurement at Caltex has undergone a major overhaul in the past 18 months - moving from being transactionally focused to much more strategic.

Two years ago the refining company and fuel supplier had a procurement function that was deemed to be operating below industry standards and was poorly perceived both within its own business and among suppliers.

To kickstart the transformation, Johanne Rossi was brought in as CPO. Her mission was to raise procurement's capabilities and profile, and work better with business partners and suppliers.

A procurement board was set up and the first supplier forum was held in April with an app which captured live reactions from individual and group interviews and workshops.

This resulted in procurement roles becoming more focused on value and relationship building; and procurement team incentives now being linked to how the team is being perceived within the business via annual feedback surveys. These show the transformation has been greeted positively.

In 2015 CIMB Group, one of the largest investment banks in Asia, set out T18 (Target 2018), an initiative to streamline its cost structure and realign its organisational culture.

Core to this was a shift from regional to centralised procurement through establishing group strategic procurement (GSP), with the aim of moving procurement from a transactional function to a strategic partner.

GPS introduced a regional operating model to build capabilities including strategic sourcing; category, vendor and contract management; and spend analytics, and it implemented an eProcurement platform.

This regional model was rolled out to Malaysia, Indonesia, Singapore and Thailand by 2017 and is in progress in Cambodia and Vietnam. The savings are impressive: cumulatively RM317 million (USD81 million) in the 28 months since October 2015, with 2017 savings at the Malaysia headquarters equating to 14 times return on investment.

In 2018 City of Gold Coast, Australasia's second-largest local government with around 3,400 staff and an annual operating budget of $1.2 billion, will host the next Commonwealth Games. However before 2015 its procurement function was low-skilled, decentralised and process-driven. A transformation was launched to develop a strategic procurement function based around a category management approach.

Source-to-Contract and Procure-to-Pay systems were introduced and strategic sourcing was applied to major categories such as waste management, pavements, electricity, contingent labour, vehicles, design and legal services.This has led to $50 million in procurement savings for 2014 and 2015.

In 2015 the city's ICT was outsourced to Fujitsu in a $140 million contract which led to savings of $4.55 million annually.

Whereas before procurement was not recognised as a profession or function at the city, in 2015, 19 staff gained MCIPS qualifications. Today the department is a well-established, value-adding business partner.

Many New Zealanders find navigating their way around government services challenging. It's not always clear what benefits are available or which agency provides the service.

Hailed by the judging panel as 'an excellent example of innovative and flexible procurement practices delivering a great outcome for the departments and directly benefiting the end customer', the SmartStart project, a cross New Zealand government procurement initiative with the Department of Internal Affairs, Ministry of Social Development, Inland Revenue and Ministry of Health, aimed to make it easier for parents and caregivers to access information and services for themselves and their babies.

It also required a secure tool to allow information sharing between agencies.

By integrating information and access to services into a new digital channel that works on any device, parents and health practitioners can save time and effort.

Web statistics show it's working and of the 19,484 babies born in the first four months, 6,076 clicked to register their baby's birth directly through SmartStart.

For the past two years, procurement at Edith Cowan University has been on a journey to become one of the country's best university functions. It hit that goal in the 2016 Australian Universities Procurement Network (AUPN) excellence program. And now other institutions want to replicate its strategic operating model, which includes aligning activities to customer needs and using technology to boost productivity.

Described by the judges as 'a fantastic entry demonstrating the team's progress and vision supported by a large number of testaments to its success', the transformation generated $2m per annum of bottom line savings and a further $1.8m per annum from negotiations and cost avoidance.

Internal customer satisfaction is rated 4.3 out of 5 and effective category management means it influences more than 65% of spend.

And it doesn't stop there. Edith Cowan is developing further solutions such as robotic process automation.

In 2015, Metro Trains made the commercially strategic move to up-skill procurement to help it win business and reduce reliance on outside help.

The team went through CIPS Certification Advanced Standard process, part of which was a review of its people development program. The goal was to achieve Gold status to help with the Victorian metro rail franchise rebid and to evolve the function.

It aimed to provide each team member with an individual plan and clear career path. It also wanted to simplify the process and end dependence on third-party owned technology.

Judges noted that 'the incorporation of both behavioural and technical competencies into the framework will promote more effective, strategic procurement practitioners', with initial results showing increased team engagement; a boost in customer satisfaction; better staff retention; succession planning; a framework for interns and a smooth transition to an organisation-wide learning management system.

With more than 3,000 large meters across its buildings, NSW Government’s electricity spend was sky high, so procurement team (NSWP) and its electricity provider ERM Business Energy collaborated to find ways to reduce costs.

With ERM recently acquiring an advanced energy analytics platform, it was a great opportunity to test the platform while delivering savings. Automatic alerts drastically reduced the time to identify and resolve issues – one faulty air conditioner that may have remained undetected for months was discovered and remedied, saving $20,000 alone.

In a six-month trial NSWP achieved a 7% reduction in spend across the 20 piloted buildings, while ERM obtained feedback to improve its service and develop a new offering and revenue stream. Some $1.5 million of savings have since been made through rolling out to 200 meters and an additional $3 million is expected by 2019/20.

Judges noted that this was “A good project demonstrating collaborative working with a win/win and low risk approach for both parties achieving real benefits.”

With more than 5,500 employees and an annual budget of $7.5 billion, Roads and Maritime Services (RMS) is one of Australia’s biggest public-sector organisations, operating a devolved procurement framework. But this wasn’t delivering good outcomes in its Regional and Freight Division. A negative review found regions were working in silos with inadequate processes and practices. A serious transformation was required.

A comprehensive, five-year roadmap was put in place. To enhance regional employment, the team introduced initiatives including a pre-qualification scheme for SME suppliers and contractors that reduced the time to lodge a submission by over 50%.

Now six weeks have been taken out of the procurement lifecycle, savings are 300% above initial projections at $40 million, more than $300 million of economic activity per year has been driven in NSW and procurement received the CEO’s Project Team of the Year 2017, the first non-engineering team to win.

A plan to invest $3 billion in a new train fleet starting in 2019 shone light on the need for a strong procurement function at NSW TrainLink.

Beginning with a transactional team with limited reach and presence, the past three years has seen a complete overhaul. A structured process was followed to create a best-in-class function that has improved stakeholder and supplier satisfaction levels and delivered untapped value in preparation for the challenge ahead.

A procurement strategy and roadmap aligned overall business strategies and a project pipeline was developed in collaboration with internal stakeholders and endorsed by the chief executive. The team achieved $3.34m savings in 2016 and $4.21m in 2017.

The judging panel noted that this project was 'an outstanding entry. NSW TrainLink developed a strong plan for delivering improved procurement activity to the business. It also used good planning and executing to encourage behaviour change by demonstrating best practice'.

Winners of the CIPS Asia Pacific Supply Management Awards 2018 – Most improved Procurement Operations - Step Change. The Oyu Tolgoi Procurement Team has been operating since 2011 and in the past seven years has travelled an inspired journey of professional growth and development as it has built itself into a world class procurement organization operating within Mongolia. The team today comprises 70 employees and supports Rio Tinto’s Oyu Tolgoi copper and gold mine situated in the South Gobi desert of Mongolia.

Starting with humble beginnings of a few people, the team is now a selfsufficient professional procurement operation managing over $485m in annual spend and generating value through supply chain excellence for the operating business.

In under nine months, as part of a companywide plan to cut $2 billion off operating costs by 2017, Qantas' 'Spend Aware' initiative transformed an outdated purchasing setup and started to roll out a new business process based on the latest technology, designed for ease of use.

'Spend Aware', which continues to be rolled out, is improving processes across the company, from easier non-catalogue requisition and better access to preferred suppliers, to better visibility of spend commitments for leaders.

The improvements across the procurement system were referenced by CEO Alan Joyce as already contributing to the group transformation plan to save $2 billion.

In an impressive demonstration of joined-up government, Queensland Treasury led the development of a complex funding model to help some of its most vulnerable people.

In July 2015 it set up a pilot to explore the use of social benefit bonds (SBBs) to address re-offending, homelessness and Indigenous disadvantage. It sought to set up a transaction framework, establish what success looks like and standardise processes and tools to make things faster in the future.

Working with more than eight partner agencies it created a 'Team Government' ethos and delivered an Australian first - successfully contracting an SBB within 15 months of expression of interest. As the program moves to the operational stage and responsibility shifts to the partners, success is more likely because of the shared ownership established by procurement.

To support strategic priorities, procurement made a business case for investment, then developed five mobile apps over six months designed to simplify, standardise and automate purchase-to-pay transactions.

The apps provide a series of mobile, user-friendly SAP interfaces to automate workflow notices to requesters and approvers while reducing admin.

This customisation of an off-the-shelf SAP application to allow goods and services transactions to be processed was flagged as a creative highlight for judges. They also noted the great alignment between the overall company goal and efforts on behalf the procurement and IT departments to help deliver it.

The judges noted that this project had 'very good use of technology to develop processes in the P2P process for mobile approvals and requisitions. Very good alignment of overall objectives of the company and ensuring the customers were also kept in mind as apps developed.

The challenge mining giant Rio Tinto faced in its operation in Weipa, Queensland, was not unusual – getting the right person for a full-time equivalent role in its warehouse. The solution, however, was innovative – splitting the job into two part-time roles to allow for return-to-work mothers, in the process increasing diversity and inclusion, improving productivity and changing the workplace culture.

When then procurement manager Vince Lavery couldn’t find an applicant with adequate experience or relocation expectations, he implemented a new flexible working roster, deliberately hiring women with transferable skills into non-traditional roles and opening up the talent pool. Now women make up 57% of the Weipa procurement team and 75% of leadership roles (up from 25%).

Plus, new safety innovations have been implemented after suggestions by women, including solutions to remove all manual handling risks in chain cutting and roller handling.

When leading Australian telco Telstra created a new generation of its gateway device - a gadget that enables advanced broadband connections six times faster than its predecessor - it needed to work closer than ever with one of its leading suppliers, NETGEAR.

In order to meet product launch dates within budget, the product required a coordinated approach from the two companies' technical, design, customer service and marketing and sales teams. NETGEAR engineers relocated to Telstra's offices to help develop the product. The product is forecast to in revenues of $57 million and reach 250,000 new customer connections.

Telstra Procurement & Supply Chain has established an ongoing strategic review forum to analyse the relationship with NETGEAR. The aim is to ensure the best practices in this programme are adopted more broadly and can be integrated into a new SRM programme which has been rolled out to 100 top suppliers.

The flagship piece of research equipment at the University of Sydney's Charles Perkins Centre - a research facility dedicated to investigating conditions like obesity, diabetes, cardiovascular disease - is its advanced preclinical MRI machine.

Sourcing such a complex piece of equipment was difficult as there were only two potential suppliers.

By highlighting the benefits of working with the University and using it as a testing site for the supplier to develop the next generation of technology, procurement made the organisation a more attractive customer.

As a bespoke piece of equipment the machine required upfront payment but the University negotiated a payment structure that shared the costs of funding evenly across both parties.

Negotiations secured two additional years of warranty to reduce operational costs by $336k, free software upgrades for the life of the contract and free software licenses which saved $510k.

Using the VendorPanel platform, BuyRegional focuses on requests for quotations (RFQs) between $2k-$150k, representing some 40-60% of procurement spend by local governments in Australia.

It creates a marketplace that gives local suppliers easier access to opportunities while allowing buyers to access a wider range of products, pricing and terms than usual. Innovations include automatic geolocation of potential suppliers, defaulting supplier sourcing to highlight local vendors. Market scans can be expanded to include metro areas or other regions where a supply chain is too shallow.

Over 30 councils have taken part in BuyRegional since launch, and platform statistics show that councils using it have awarded 84.4% of RFxs locally. Average cost avoidance rate of 9.74% has been achieved.

Indigenous owned, national office furniture supplier Winya has a bold mission: to design Australia’s most socially inclusive business. But its focus on disadvantaged indigenous populations and remote communities does not come cheap.

It has taken considerable expense and time to seek out and visit remote communities with a view to providing meaningful work and skills where there is often none. Procurement is therefore more cumbersome than for other businesses and profitability impacted.

However, this small business has overcome numerous obstacles and made full use of the Government’s commitment to indigenous procurement to scale its business, secure high-profile contracts and empower indigenous people through employment.